A Protective Property Trust Will is an ideal solution for those who do not wish to opt for a Family Trust. This is because a Protective Property Trust is more cost effective to set up compared to a Lifetime Property Trusts and is usually better than having a standard Will for most couples, and a more cost effective option for younger families.
Protective Property Trusts Come in Two Types:
The first Protective Property Trust option
The first type is a will based trust which comes into effect after death. The Property Trust is written into the will and protects the interests of your beneficiaries. This type of Property Trust can also make sure that your children do not lose their inheritance.
The terms of the Property Trust are set out in the will which also names the trustees and beneficiaries. These sort of Property Trusts are useful if the children are under 18 when the testator dies and in cases where the testator is the sole owner of a property but they want their partner or spouse to continue living in the property after their death with the children as the ultimate beneficiaries.
The second Protective Property Trust option
The second type of Property Trust is a lifetime trust. This is set up during a person’s lifetime, with it coming into effect straight away. They can be very useful in cases where there are children from other relationships and can prevent sideways disinheritance where someone inherits, remarries and cuts certain people out of their will (Read our article about Sideways Disinheritance). In order to prevent this, a lifetime Property Trust can be put in place. If a property is jointly owned the title can be converted to “Tenants in Common”. This gives each person their own share of the property and can then be disposed of in accordance with their wishes rather than passing automatically to their spouse or partner when they die. The will can be rewritten to give the survivor the right to stay in the property until their death with the deceased persons
If a property is jointly owned the title can be converted to “Tenants in Common”. This gives each person their own share of the property and can then be disposed of in accordance with their wishes rather than passing automatically to their spouse or partner when they die. The will can be rewritten to give the survivor the right to stay in the property until their death with the deceased persons share being owned by the trust.
The survivor may move or downsize if they wish and this will also be written into the trust.
This type of trust is very flexible (sometimes being known as a Flexible Life Interest Trust or FLIT)
The advantages of a Flexible Life Interest Trust
- Prevention of Sideways Disinheritance. The survivor can only leave their own share of the property to their stated beneficiaries so if they were to remarry the wishes of the first person to die are not overridden. On the second death the beneficiaries of the first to die will receive their inheritance as the second person to die has not inherited the entire property – only their own share.
- Protective Property Trusts can stop other creditors from making a claim against half of the property as long as there was no intent to deprive creditors of money when the trust was put in place.